Question 1

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, consumer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 2

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then

Accepted Answer

The answer of Suppose a country abandons a no-trade policy...

Question 3

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Accepted Answer

When a country allows trade in coffee with other countries, the domestic price of coffee will eventually equal the world price of coffee through the process of arbitrage. If the domestic price of coffee is higher than the world price, then domestic producers will find it profitable to export coffee, which will increase the global supply of coffee and lower the world price. Conversely, if the domestic price of coffee is lower than the world price, then the country will import coffee, which will decrease the global supply of coffee and raise the world price. Eventually, these forces will converge to make the domestic price of coffee equal the world price.

Question 4

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 5

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

The answer of Assume, for Colombia, that the domestic price...

Question 6

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Accepted Answer

Allowing international trade in steel will lead to an increase in the supply of steel available to domestic consumers. This will likely result in a decrease in the domestic price of steel. However, regardless of whether the country is importing or exporting steel, the sum of consumer surplus and producer surplus for domestic traders of steel will increase. The increase in consumer surplus will be due to the decrease in the domestic price of steel, while the increase in producer surplus will be due to the increased opportunities for domestic steel producers to sell their steel abroad. Thus, choice A is correct. Choice B may or may not be true - if consumers find that imported steel is cheaper or of higher quality, then they may demand more steel, but if the domestic steel industry is still producing enough steel to satisfy domestic demand, then there may be no increase in quantity demanded. Choice C is also potentially true, as allowing international trade may put upward pressure on steel prices as domestic steel producers seek to take advantage of higher prices abroad. However, it is likely that the price increase will be small since imports will be available to compete with domestic production. Finally, choice D is incorrect - international trade can lead to both winners and losers, but there is no reason to assume that the losses of the losers will exceed the gains of the winners in this case.

Question 7

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, this country will

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 8

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

Accepted Answer

The answer of The world price of a pound of...

Question 9

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. At the world price and with free trade,

Accepted Answer

At the world price with free trade, the domestic price will match the world price, leading to an increase in quantity demanded and a decrease in quantity supplied in the domestic market. The market will reach the equilibrium where quantity demanded equals quantity supplied, which is shown in the figure as point E. Hence, the calculator market is in equilibrium. Option A is incorrect as the domestic quantity of calculators demanded is not greater than the domestic quantity of calculators supplied at point E. Option C is incorrect as the demand curve is downward-sloping, which implies that demand is not perfectly inelastic. Option D is not necessarily true as domestic producers may face competition from foreign producers leading to lower profits, and domestic consumers may benefit from lower prices, but domestic producers may lose their jobs.

Question 10

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. Without trade, producer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 11

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began

Accepted Answer

Before trade, the price of a television in Paraguay was higher than the world price. This indicates that Paraguay was producing televisions at a higher cost than other countries. By allowing trade, Paraguay can now import televisions from other countries at a lower cost (equal to the world price) and sell them for a lower price in order to remain competitive. Therefore, the price of a television in Paraguay would decrease to $300 after allowing trade and importing televisions.

Question 12

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, producer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 13

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. Without trade, consumer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 14

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Accepted Answer

The answer of Suppose a country abandons a no-trade policy...

Question 15

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. This country

Accepted Answer

The market for calculators in this country shows that it is able to produce calculators at a lower opportunity cost than the rest of the world (as represented by the world price line being higher than the domestic supply curve). This gives the country a comparative advantage in calculator production and it should export calculators to take advantage of this. Additionally, the country is a price taker in the world economy as it has no control over the world price of calculators. Therefore, all of the options (A-C) are correct.

Question 16

Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,

Accepted Answer

If Iceland becomes an importer of coats, this means that they are now purchasing coats from other countries. This would increase the supply of coats available in Iceland and therefore lower the price of coats for consumers. With a lower price, consumers would be able to enjoy a higher level of consumer surplus.

Question 17

When a country allows international trade and becomes an importer of a good,

Accepted Answer

When a country allows international trade and becomes an importer of a good, domestic producers may become worse off due to competition with foreign producers. However, domestic consumers benefit from access to cheaper foreign goods. In general, the gains of the winners (consumers) exceed the losses of the losers (producers), resulting in an overall net gain from trade. This is known as the principle of comparative advantage.

Question 18

Within a country, the domestic price of a product will equal the world price if

Accepted Answer

When a country allows free trade, it means that there are no trade restrictions such as tariffs or quotas. In such a scenario, the domestic price of a product will be equal to the world price because there are no barriers to trade that can distort the market. Therefore, the correct answer is B.

Question 19

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. As a result of trade, total surplus increases by

Accepted Answer

Trade allows the country to consume at a lower price and increases the quantity consumed, resulting in an increase in consumer surplus. Additionally, producers are able to sell their products at a higher price in the international market, resulting in an increase in producer surplus. The total increase in surplus is the sum of consumer surplus and producer surplus, which in this case is $250. Therefore, choice C is the correct answer.

Question 20

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. The world price for calculators represents

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Quiz 9: Application: International Trade

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, consumer surplus is

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, this country will

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. At the world price and with free trade,

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, producer surplus is

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, producer surplus is

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, consumer surplus is

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. This country

Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,

When a country allows international trade and becomes an importer of a good,

Within a country, the domestic price of a product will equal the world price if

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. As a result of trade, total surplus increases by

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. The world price for calculators represents